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Company Registration cancellation procedure

How to Cancel Company Registration under Companies Act


It is not an easy task to get a business going in a situation of stiff market competition. Also businesses need not run as per an entrepreneur's plan or desire. It would be very difficult for businesses to function if it does not have sufficient funds or if it has a proper management system in place. Such inconsistencies could lead the company to failure or untoward circumstances. In such a scenario, the business might look at canceling its company registration.

The process of canceling the company registration has been mitigated unlike some years ago. There are two ways for a company to cancel its registration which are as follows:

(a) Fast Track Exit (FTE) Mode

The Fast Track Exit mode helps to close the company with the company incurring minimal legal procedures. Even a defunct company can apply for the Fast Track Exit mode. A defunct company is a company which neither has assets not liabilities and that has not initiated any kind of business or activity since incorporation of company since a year.

The Fast Track Exit is a part of Section 560 of the Companies Act, 1956. As per the guidelines issued by the Ministry of Corporate Affairs, a company or a defunct company can have its name struck off from the register. The respective director would be required to download the form and digitally sign the documents by paying a nominal fee for the form. The registration of the Defunct companies can be canceled by the registrar of companies. As per section 506, a chance of being heard must be given to the defunct companies before taking any action.

Once the application is received, the registrar would have to display the company's name on its website specifically for 30 days, as a notice or intimation to anyone who might have an objection in striking off the name of the company.

Post the 30 days period, a certificate for closure of the company would be issued by the registrar of companies stating that the name of the company is going to be struck off from the register of companies.

Requisite Documentation

The documents that are required to be attached with the Fast Track Exit form are as follows:

Board of Directors' approval letter with regards to the closure of the company and the cancelation of registration.

The closure application can be sent only after closing all bank accounts connected with the company and after canceling registrations with the government authorities.

The company's director or promoter must provide an affidavit/stamp paper or notarized copy particularly mentioning each of the following points once the board resolution has been passed to cancel the company registration:

(1) Elucidate or claim that the directors applying for the cancelation of company registration are the currently chaired directors of the company.

(2) All bank accounts that did exist in the company's name have been closed.

(3) In the past one year, no company has been in collaboration for any business work or transaction.

(4) Explaining with valid reasons why the company registration is being cancelled and why was the business not doing well.

(5) Explaining that the company has no legal liabilities or dues as on the date of declaration and the company also has no litigations pending before any court of law or against any other company.

Once the above procedure is completed, an Indemnity Bond must be executed  on a stamp paper by the company with two individual as its witness. In the Indemnity Bond, the following tasks must be agreed to be done:

(1) To indemnify if any loss happens to any individual due to the striking off of the company name.

(2) Any legal claims that happen in the future, after the company name is struck off, may be paid and settled.

(3) Unsettled legal claims and liabilities which did not come to the company's notice till a particular time are resolved.

(b) The Dormant Status

A company is said to be of dormant status when the company has done its registration for a project which is going to happen in the future. A dormant company is a company that is temporarily inactive.  Below mentioned are the determining factors or key characteristics of a dormant company:

  • It has not done any major transaction.
  • Its business is not functioning or operating.
  • The company has not filed its financial statements and annual returns.

The dormant status helps reduce the cost of maintaining such companies and also helps to reduce compliance as well.

Canceling a company registration can be a big task and requires submission of the relevant documents to the respective authority. The board of directors must be vigilant while submitting the documents for closure of business. A business might require expert advice in order to file the documents for canceling the company registration.

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